of Asia Pacific Data Centre Holdings Limited (ACN 159 621 735) and its controlled entities: Asia Pacific Data Centre Limited (ACN 159 624 585) Asia Pacific Data Centre Trust (ARSN 161 049 556) and Asia Pacific Data Centre Trust (ARSN 161 049 556)
Directors Report... 2 Auditor s Independence Declaration... 5 Consolidated Statements of Profit or Loss and Other Comprehensive Income... 6 Consolidated Statements of Financial Position as at 31 December 2015... 7 Consolidated Statement of Changes in Equity the Group... 8 Statement of Changes in Equity APDC Trust... 9 Consolidated Statements of Cash Flows... 10 Notes to the consolidated financial statements... 11 1. Reporting entities... 11 2. Basis of preparation... 11 3. Summary of significant accounting policies... 12 4. Segment information... 12 5. Income tax... 12 6. Earnings per stapled security... 13 7. Distributions paid and payable... 13 8. Investment properties... 14 9. Responsible entity management fees... 16 10. Interest bearing liabilities... 16 11. Financial instruments... 17 12. Related party disclosures... 18 13. Significant party disclosures... 18 14. Subsequent events... 19 Directors Declaration... 20 Independent Auditor s Review Report... 21 1
Directors Report The directors of Asia Pacific Data Centre Holdings Limited (APDC Holdings) and the directors of Asia Pacific Data Centre Limited (APDC Limited) as responsible entity for Asia Pacific Data Centre Trust (APDC Trust) (collectively the Directors ) present their report for APDC Holdings and APDC Trust together with the consolidated interim financial report of APDC Holdings and its controlled entities (Group, APDC Group) and the interim financial report of APDC Trust. APDC Holdings and APDC Limited are both companies limited by shares, incorporated and domiciled in Australia. The registered office for both companies is Level 32, 19 Martin Place, Sydney NSW 2000 and principal place of business for both companies is Level 13, 135 King Street, Sydney NSW 2000. The shares of APDC Holdings and units of APDC Trust are stapled and can only be traded as stapled securities. Although there is no ownership interest between APDC Holdings and APDC Trust, APDC Holdings is deemed to be the parent entity of the Group under Australian Accounting Standards (AASB). 1. Directors The following persons have held office as Directors during the half year: Ian Fraser Chris Breach Francina Turner John Wright Chairman, Non-Executive Director Non-Executive Director CEO, Executive Director Non-Executive Director 2. Principal activities The Group s principal activity is to invest in data centre investment property in Australia. APDC Trust owns the following data centre investment properties: M1 S1 P1 Port Melbourne, Melbourne, VIC Macquarie Park, Sydney, NSW Malaga, Perth, WA There were no significant changes in the nature of the activities of the Group during the half year. 3. Operating and financial review 3.1 Results of operations The Group earned a profit for the half year and distributable earnings of $5,415,000. Earnings per stapled security was 4.71 cents. APDC Group reports statutory profit for the half year in accordance with Australian Accounting Standards. Distributable earnings is the primary basis upon which distributions are determined by the Directors. Distributable earnings are a non-aasb measure that represents the Directors view of the amount available for distribution to securityholders from ongoing activities for the half year. 2
APDC APDC APDC APDC Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 $'000 $'000 $'000 $'000 Profit for the half year and Distributable earnings 5,415 5,175 5,415 5,175 Undistributed income brought forward 94-94 - Amount available for distribution 5,509 5,175 5,509 5,175 Undistributed income carried forward (161) - (161) - Total distribution for the half year 5,348 5,175 5,348 5,175 Basic earnings per security (cents) - - 4.71 4.50 Distributable earnings per security (cents) - - 4.71 4.50 Distributions paid and payable - - 5,348 5,175 Distributions per security (cents) - - 4.65 4.50 Profit has been calculated in accordance with Australian Accounting Standards. The total distribution for the half year is 4.65 cents per stapled security. An interim distribution of 2.30 cents per stapled security was paid on 28 October 2015. A final distribution for the half year of 2.35 cents per stapled security will be paid on 26 February 2016. The Group s direct trust expenses and responsible entity operating expenses for the half year were $582,000. There were no movements in the total number of securities on issue for the Group and APDC Trust during the half year. 3.2 Direct property investments APDC APDC APDC APDC Group Group Trust Trust 31 Dec 2015 30 June 2015 31 Dec 2015 30 June 2015 $'000 $'000 $'000 $'000 M1, Melbourne 62,800 62,800 62,800 62,800 S1, Sydney (1) 70,000 70,000 70,000 70,000 P1, Perth 33,500 33,500 33,500 33,500 Total investment properties at fair value 166,300 166,300 166,300 166,300 Net assets 143,224 143,132 142,074 141,982 Net tangible asset backing per security ($) 1.25 1.24 1.24 1.23 (1) The Bankwest Debt Facility is secured by a mortgage over S1 Sydney data centre asset. Refer Note 10. The fair value of the assets is derived using the basis set out in Note 8(a) to the financial statements. The fair value of the investment properties is determined by the Directors by reference to the most recent independent valuation for that property updated to take into account any changes in valuation factors. All the investment properties were independently valued as at 30 June 2015. There were no changes to the carrying values of the investment properties during the half year. All of the Group s data centres are wholly-owned by APDC Trust. The data centres are leased to NEXTDC Limited (NEXTDC) on a triple net basis for initial terms of 15 years expiring in 2027 and 2028, with options for up to another 25 years. 3
for the half vear ended 31 December 2015 Rental income for the half year was $6,5S8,000 as detailed below M1, Melboume 51, Sydney P1, Perth Rental income Rental income I July 2015 to I July 2014 to 31 Dec2015 31Dee2014 $'000 2,451 2,398 2,750 2,689 1.357 1,327 6. 558 6.414 Pursuant to the leases, a CPI increase of 15% was applied to the M1, 51 and P1 rentals effective 21 December 2015. The annualised rental income from 21 December2015 is $4,972,000 for M1, $5,s7g,000 for s1 and $2,751,000 for P1. 3.3 Bankwest Debt Facility APDC Trust has a five year facility with Bankwest (a division of Commonwealth Bank of Australia) (Bankwest) to provide the Group with up to $29 míllion of asset-secured debt funding (Debt Facility). The Debt Facility is provided at market interest rates for a five year term, and is secured by a mortgage over the 31 Sydney dãta centre asset. At 31 December 2015, $25 million of the facitity was drawn (Core Debt). APDC Trust renegotiated the interest rate margin on its Debt Facility with Bankwest. The margin has reduced lrom 2.15o/o per annum to 1.50% per annum effective from 6 July 201S. APDC Trust has a swap agreement to fix the floating interest rate component over $12.5 million of the drawn amount for five years. The effective cost of the Core Debt (loan interest, margin and swap interest) is 4.S9% per annum as at 31 December 2015. 3.4 Real estate funds management APDC Limited, a wholly owned subsidiary of APDC Holdings, provides responsible entity services to ApDC Trust. During the half year, APDC Limited charged APDC Trust a management fee equal io the cost to ApDC Limited to provide these services. Refer to Note 9 to the financial statements. 4. Auditor's independence declaration The auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5. 5. Rounding of amounts to the nearest thousand dollars The Group and APDC Trust are of a kind referred to in Class Order g8/100 (as amended) issued by the Australian Securities & lnvestments Commission relating to the "rounding off' of amounts in the directors' report and interim financial report. Amounts in the Directors' Report and interim financial reports have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otheruvise stated. This report is made in accordance with resolutions of the Directors of Asia Pacific Data Centre Holdings Limited and Asia Pacific Data Centre Limited as responsible entity for Asia Pacific Data Centre Trust. - 4. l* lan Fraser Chairman Brisbane 22 February 2016 4
ABCD Lead Auditor s Independence Declaration under Section 307C of the Corporations Act 2001 To: the directors of Asia Pacific Data Centre Holdings Limited and the directors of Asia Pacific Data Centre Limited the responsible entity of Asia Pacific Data Centre Trust I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2015 there have been: (i) (ii) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and no contraventions of any applicable code of professional conduct in relation to the review. KPMG Jillian Richards Partner Brisbane 22 February 2016 5 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
Consolidated Statements of Profit or Loss and Other Comprehensive Income APDC APDC APDC APDC Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 Note $'000 $'000 $'000 $'000 Revenue Rental income 6,558 6,414 6,558 6,414 Interest income 56 55 43 45 Net gain from fair value adjustment on investment properties - - - - Total revenue 6,614 6,469 6,601 6,459 Expenses Operating expenses 582 565 569 555 Interest expense and finance costs 617 729 617 729 Total expenses 1,199 1,294 1,186 1,284 Profit before income tax expense 5,415 5,175 5,415 5,175 Income tax expense - - - - Profit for the half year 5,415 5,175 5,415 5,175 Profit for the half year attributable to: Owners of APDC Holdings - - - - Owners of APDC Trust - - 5,415 5,175 Non-controlling interest - members of APDC Trust 5,415 5,175 - - Total profit for the half year 5,415 5,175 5,415 5,175 Other comprehensive income Items that may be reclassified to profit or loss: Effective portion of changes in fair value of cash flow hedge 25 (253) 25 (253) Other comprehensive income, net of tax 25 (253) 25 (253) Total comprehensive income for the half year 5,440 4,922 5,440 4,922 Total comprehensive income for the half year attributable to: Owners of APDC Holdings - - - - Owners of APDC Trust - - 5,440 4,922 Non-controlling interest - members of APDC Trust 5,440 4,922 - - Total comprehensive income for the half year 5,440 4,922 5,440 4,922 Basic and diluted earnings per security (cents) 6 - - 4.71 4.50 The accompanying notes are an integral part of these consolidated financial statements. 6
Consolidated Statements of Financial Position as at 31 December 2015 APDC APDC APDC APDC Group Group Trust Trust 31 Dec 2015 30 June 2015 31 Dec 2015 30 June 2015 Note $'000 $'000 $'000 $'000 Current assets Cash and cash equivalents 6,819 5,507 5,308 3,933 Trade and other receivables 22-504 500 Security deposit 8 9 - - Prepayments 89 26 23 - Total current assets 6,938 5,542 5,835 4,433 Non-current assets Investment properties 8 166,300 166,300 166,300 166,300 Property, plant and equipment 1 1 - - Deferred tax asset 15 15 - - Total non-current assets 166,316 166,316 166,300 166,300 Total assets 173,254 171,858 172,135 170,733 Current liabilities Trade and other payables 1,906 672 1,954 710 Distribution payable 2,703 2,645 2,703 2,645 Provision for employee benefits 17 13 - - Total current liabilities 4,626 3,330 4,657 3,355 Non-current liabilities Interest bearing liabilities 10 24,805 24,772 24,805 24,772 Derivatives 11 599 624 599 624 Total non-current liabilities 25,404 25,396 25,404 25,396 Total liabilities 30,030 28,726 30,061 28,751 Net assets 143,224 143,132 142,074 141,982 Equity Contributed equity 1,150 1,150 115,110 115,110 Asset revaluation reserve - - 27,402 27,402 Cashflow hedge reserve - - (599) (624) Undistributed income - - 161 94 Total equity attributable to owners of APDC Holdings/APDC Trust 1,150 1,150 142,074 141,982 Non-controlling interest attributable to APDC Trust 142,074 141,982 - - Total equity 143,224 143,132 142,074 141,982 The accompanying notes are an integral part of these consolidated financial statements. 7
Consolidated Statement of Changes in Equity the Group Total equity Nonattributable to controlling owners of interest Contributed APDC attributable to Total equity Holdings APDC Trust equity $'000 $'000 $'000 $'000 Total equity at 1 July 2014 1,150 1,150 126,519 127,669 Total comprehensive income for the half year Profit for the half year - - 5,175 5,175 Other comprehensive income for the half year - - (253) (253) Total comprehensive income for the half year - - 4,922 4,922 Contributions by and distributions to owners of the Group Distributions paid or provided for - - (5,175) (5,175) Total contribution by and distributions to owners of the Group - - (5,175) (5,175) Total equity at 31 December 2014 1,150 1,150 126,266 127,416 Total equity at 1 July 2015 1,150 1,150 141,982 143,132 Total comprehensive income for the half year Profit for the half year - - 5,415 5,415 Other comprehensive income for the half year - - 25 25 Total comprehensive income for the half year - - 5,440 5,440 Contributions by and distributions to owners of the Group Distributions paid or provided for - - (5,348) (5,348) Total contribution by and distributions to owners of the Group - - (5,348) (5,348) Total equity at 31 December 2015 1,150 1,150 142,074 143,224 The accompanying notes are an integral part of these consolidated financial statements. 8
Statement of Changes in Equity APDC Trust Asset Cashflow Contributed Undistributed revaluation hedge Total equity Income reserve reserve equity $'000 $'000 $'000 $'000 $'000 Total equity at 1 July 2014 115,110-11,802 (393) 126,519 Total comprehensive income for the half year Profit for the half year - 5,175 - - 5,175 Other comprehensive income for the half - - - (253) (253) Total comprehensive income for the half year - 5,175 - (253) 4,922 Contributions by and distributions to owners of the Trust Transfer to asset revaluation reserve - - - - - Distributions paid or provided for - (5,175) - - (5,175) Total contribution by and distributions to owners of the Trust - (5,175) - - (5,175) Total equity at 31 December 2014 115,110-11,802 (646) 126,266 Total equity at 1 July 2015 115,110 94 27,402 (624) 141,982 Total comprehensive income for the half year Profit for the half year - 5,415 - - 5,415 Other comprehensive income for the half - - - 25 25 Total comprehensive income for the half year - 5,415-25 5,440 Contributions by and distributions to owners of the Trust Transfer to asset revaluation reserve - - - - - Distributions paid or provided for - (5,348) - - (5,348) Total contribution by and distributions to owners of the Trust - (5,348) - - (5,348) Total equity at 31 December 2015 115,110 161 27,402 (599) 142,074 The accompanying notes are an integral part of these consolidated financial statements. 9
Consolidated Statements of Cash Flows APDC APDC APDC APDC Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 $'000 $'000 $'000 $'000 Cashflows from operating activities Receipts from lessee 8,461 7,120 8,461 7,120 Payments to suppliers and employees (649) (661) (575) (565) Net GST payments to ATO (650) (645) (650) (645) Interest received 54 55 43 45 Net cash inflows from operating activities 7,216 5,869 7,279 5,955 Cashflows from investing activities - - - - Cashflows from financing activities Payment of interest and finance costs (614) (706) (614) (706) Payment of distributions (5,290) (5,175) (5,290) (5,175) Net cash inflows/(outflows) from financing activities (5,904) (5,881) (5,904) (5,881) Net increase/(decrease) in cash and cash equivalents 1,312 (12) 1,375 74 Cash and cash equivalents at the beginning of the half year 5,507 5,308 3,933 3,677 Cash and cash equivalents at the end of the half year 6,819 5,296 5,308 3,751 The accompanying notes are an integral part of these consolidated financial statements. 10
Notes to the consolidated financial statements 1. Reporting entities Asia Pacific Data Centre Group (APDC Group) comprises Asia Pacific Data Centre Holdings Limited (APDC Holdings) and its wholly owned subsidiary Asia Pacific Data Centre Limited (APDC Limited), and Asia Pacific Data Centre Trust (APDC Trust). The shares of APDC Holdings are stapled to units in APDC Trust. The stapled securities cannot be traded or dealt with separately. The Constitutions of APDC Holdings and APDC Trust ensure that, for so long as the two entities remain jointly quoted, the number of shares of APDC Holdings and the number of units in APDC Trust are equal and shareholders and unitholders are identical. APDC Holdings was registered as a company on 24 July 2012, APDC Limited registered as a company on 25 July 2012, and APDC Trust was established on 1 November 2012. All of the entities are domiciled in Australia. APDC Group was established on 3 December 2012 and was quoted on the Australian Securities Exchange (ASX Code: AJD) from 9 January 2013. The reporting entities are APDC Holdings and its controlled entities (APDC Limited and APDC Trust) and APDC Trust (collectively Group entities ). The consolidated interim financial statements of APDC Holdings incorporate the assets and liabilities of APDC Holdings and its controlled entities including APDC Limited and APDC Trust (Group, APDC Group). As permitted by Class Order CO 05/642, issued by the Australian Securities & Investments Commission, this report presents the consolidated financial statements of the Group and the financial statements of APDC Trust, and their accompanying notes. This presentation is consistent with the annual financial report for the year ended 30 June 2015. 2. Basis of preparation (a) Statement of compliance These interim financial statements are general purpose financial statements prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001, and with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the financial position and performance of the Group and APDC Trust since the last annual consolidated financial statements of the Group and the financial statements of APDC Trust as at and for the year ended 30 June 2015. These interim financial statements do not include all the notes of the type normally included in the annual financial report. Accordingly, these financial statements are to be read in conjunction with the consolidated financial statements of the Group and APDC Trust for the year ended 30 June 2015 and any public announcements made by the Group and APDC Trust during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The interim financial statements were authorised for issue by the Board of Directors on the date the Directors Report is signed. The Directors have the power to amend and reissue the interim financial statements. The Group and APDC Trust are of a kind referred to in Class Order 98/100 (as amended) issued by the Australian Securities & Investments Commission relating to the rounding off of amounts in the directors report and interim financial report. Amounts in the Directors Report and interim financial reports have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise stated. (b) Significant judgements and estimates The preparation of these interim financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. 11
Notes to the consolidated financial statements 2. Basis of preparation (cont.) (b) Significant judgements and estimates (cont.) In applying accounting policies, management continually evaluates estimates, assumptions and historical judgements based on experience and other factors, including expectations about future events that may have an impact on the Group entities. All judgements, estimates and assumptions made are believed to be reasonable, based on the most current set of circumstances available to management. Actual results may differ from the judgements, estimates and assumptions. Significant estimates, assumptions and historical judgements made by management in the preparation of these interim financial statements were consistent with those used in the annual financial report for the year ended 30 June 2015. 3. Summary of significant accounting policies The accounting policies applied in these interim financial statements for the half year are the same as those applied in the Group s consolidated financial statements and APDC Trust s financial statements as at and for the year ended 30 June 2015. 4. Segment information The Group entities present operating segments based on the internal information that is available to the Chief Executive Officer (CEO), who is the Group s chief operating decision maker. The Group entities operate wholly within Australia and derive rental income from investments in commercial property and 100 per cent of this income is derived from one tenant and as such this is considered to be the only segment in which the Group and APDC Trust is engaged. The operating results are regularly reviewed by the CEO to make decisions about resources to be allocated and to assess performance. There are no reconciling items that exist between the discrete financial information reviewed by the CEO and the financial statements relating to revenue, profit or loss, assets and liabilities or other material items. 5. Income tax APDC Group There were no changes to the Group s taxation policy for the half year. The Group s consolidated effective tax rate for the half year was nil (half year to 31 December 2014: nil). APDC Trust Under current Australian tax legislation, APDC Trust is not liable for income tax, provided that the taxable income (including any assessable component of any capital gains from the sale of investment assets) is fully distributed to unit holders each year. Distributions in excess of the taxable income of APDC Trust are treated as tax deferred distributions. The tax deferred component reduces a security holder s capital gains tax base applicable to the units held in APDC Trust. 12
Notes to the consolidated financial statements 6. Earnings per stapled security (1) Refer to Note 7. APDC APDC APDC APDC Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 Earnings used in the calculation of earnings per security ($'000) - - 5,415 5,175 Basic earnings per security (cents) - - 4.71 4.50 Diluted earnings per security (cents) - - 4.71 4.50 Weighted average number of securities on issue used in the calculation of basic and diluted earnings per security 115,000,100 115,000,100 115,000,100 115,000,100 Distributable earnings ($'000) (1) - - 5,415 5,175 Distributable earnings per security (cents) - - 4.71 4.50 Weighted average number of securities on issue used in the calculation of distributable earnings per security - - 115,000,100 115,000,100 7. Distributions paid and payable The following distributions were paid and payable by APDC Trust: Distribution cents per stapled security Distributable earnings for the half year was $5,415,000 or 4.71 cents per stapled security. Total amount $'000 Distributions for the quarter ended: 30 September 2015 2.30 2,645 31 December 2015 (payable 26 February 2016) 2.35 2,703 4.65 5,348 Distributions for the quarter ended: 30 September 2014 2.25 2,587 31 December 2014 (paid 27 February 2015) 2.25 2,588 4.50 5,175 13
Notes to the consolidated financial statements 7. Distributions paid and payable (cont.) The distribution of $2,645,000 for the quarter ended 30 June 2015 was paid on 27 August 2015. 8. Investment properties APDC Trust has three investment properties, Melbourne (M1), Sydney (S1) and Perth (P1). The Trust has lease agreements over the properties with NEXTDC Limited (NEXTDC) on a triple net basis and for initial terms of 15 years expiring in 2027 and 2028 with options for up to another 25 years. NEXTDC has made rental payments for M1, S1 and P1 in accordance with the lease agreements. The land and buildings in the current portfolio are leased on long-term triple net terms pursuant to which all maintenance, taxes, insurance and outgoings are paid by the tenant, NEXTDC. The leases provide for upwards only annual CPI rental increases and market reviews every 5 years, not exceeding 110% of the preceding year s rent. (a) Basis of valuation The carrying amount of investment property is the fair value of the property as assessed by the Directors. The Directors assess fair value based on the most recent independent valuation updated to take into account any changes in estimated rental income, property capitalisation rates or estimated yields with reference to market evidence of transaction prices for similar properties. Independent valuations when obtained, are performed by an independent valuer with a recognised professional qualification and recent experience in the location and category of property being valued. The independent valuations utilise the following methodologies: active market prices, capitalisation of net income and discounted cash flow: i. The active market prices method assesses a property s value based on the sale price of comparable properties that have recently traded in commercial, arms length transactions. ii. iii. APDC APDC APDC APDC Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 $'000 $'000 $'000 $'000 Profit for the half year and distributable earnings 5,415 5,175 5,415 5,175 Undistributed income brought forward 94-94 - Amount available for distribution 5,509 5,175 5,509 5,175 Undistributed income carried forward (161) - (161) - Distribution paid and payable 5,348 5,175 5,348 5,175 The capitalisation of net income method capitalises the current rent received, at a rate analysed from the most recent transactions of comparable property investments, adjusted to take into consideration a number of factors including: lease term remaining; the relationship of current rent to the market rent; the location; prevailing investment market conditions; and other property specific conditions. The discounted cash flow method calculates a property s value by using projections of future cash flows and terminal value derived from the term of any existing leases, and from external evidence such as current market rents for similar properties in the same area and condition, and using discount rates that reflect the current market assessments of the uncertainty in the amount and timing of cash flows specific to the asset. Independent valuations for each investment property will take place once every three years or earlier should the Directors consider it appropriate. 14
Notes to the consolidated financial statements 8. Investment properties (cont.) (b) Fair value of investment properties Property Acquisition date Cost Previous fair value adjustments Fair value June 2015 Fair value adjustments Dec 2015 Fair value Dec 2015 $'000 $'000 $'000 $'000 $'000 M1, Melbourne 21/12/2012 52,005 10,795 62,800-62,800 S1, Sydney 21/12/2012 57,548 12,452 70,000-70,000 P1, Perth 21/12/2012 28,470 5,030 33,500-33,500 Total 138,023 28,277 166,300-166,300 There were no material changes to the valuation factors reflected in the last independent valuations during the half year. Therefore, there were no changes to the carrying values of the investment properties during the half year. The investment properties are carried at fair value of the property as assessed by the Directors by reference to the most recent independent valuation for that property at 30 June 2015: Property Date of last independent valuation Independent valuation Annual net property income (m 2 per annum) Adopted capitalisation rate Adopted discount rate Lease expiry M1, Melbourne 30/06/2015 62,800 (2) $ 282 7.75% 9.00% 20/12/2027 S1, Sydney (1) 30/06/2015 70,000 (3) $ 275 7.75% 9.00% 14/05/2028 P1, Perth 30/06/2015 33,500 (4) $ 284 8.00% 9.25% 29/11/2028 All independent valuations used the capitalisation and discounted cash flow valuation methods. (1) The Bankwest Debt Facility is secured by a mortgage over S1 Sydney data centre asset. Refer Note 10. (2) Valued by Andrew Lett, AAPI CBRE Valuations Pty Ltd (3) Valued by Kenny Duncanson, AAPI MRICS, CBRE Valuations Pty Ltd (4) Valued by Jason Fenner, AAPI, CBRE Valuations Pty Ltd The carrying amount of investment properties is set out below: APDC APDC APDC APDC Group Group Trust Trust Half year to Year to Half year to Year to 31 Dec 2015 30 June 2015 31 Dec 2015 30 June 2015 $'000 $'000 $'000 $'000 Carrying amount at the beginning of the period 166,300 150,700 166,300 150,700 Fair value adjustments - 15,600-15,600 Carrying amount at the end of the period 166,300 166,300 166,300 166,300 15
Notes to the consolidated financial statements 8. Investment properties (cont.) (c) Amounts recognised in the Statement of Profit or Loss and Other Comprehensive Income APDC APDC APDC APDC Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to Property 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 $'000 $'000 $'000 $'000 Rental income 6,558 6,414 6,558 6,414 Net gain from fair value adjustment for investment properties - - - - Direct operating expenses of properties that generated rental income - - - - 9. Responsible entity management fees APDC Limited, the responsible entity of APDC Trust, is entitled to a management fee calculated as up to 2% per annum of the gross asset value of APDC Trust. It is payable from the income (or other assets) of APDC Trust, as and when incurred. As long as APDC Trust does not have its own management structure and APDC Limited provides the responsible entity services to APDC Trust and APDC Trust is stapled to APDC Holdings, APDC Limited will charge APDC Trust on a cost recovery basis for the direct APDC Trust expenses and for the operating expenses of APDC Holdings and APDC Limited. Management fees of $437,000 were expensed by APDC Trust for the half year (half year to 31 December 2014 $407,000). 10. Interest bearing liabilities APDC APDC APDC APDC Group Group Trust Trust 31 Dec 2015 30 June 2015 31 Dec 2015 30 June 2015 $'000 $'000 $'000 $'000 Commercial loan - Bankwest 25,000 25,000 25,000 25,000 Unamortised finance costs (195) (228) (195) (228) Total interest bearing loans 24,805 24,772 24,805 24,772 APDC Trust has a five year facility with Bankwest (a division of Commonwealth Bank of Australia) (Bankwest) to provide the Group with up to $29 million of asset secured debt funding (Debt Facility). The Debt Facility matures on 28 November 2018 and is secured by a mortgage over S1 Sydney data centre asset. The Debt Facility comprises a cash advance facility with a maximum limit of $25 million and a multi option facility with a maximum limit of $4 million. At 31 December 2015, there were no drawdowns against the multi option facility. The Debt Facility is a variable rate loan with interest charged at 1.50% per annum above the Bank Bill Swap Rate from 6 July 2015. For the period 1 July 2015 to 5 July 2015, the interest margin was 2.15% per annum. 16
Notes to the consolidated financial statements 11. Financial instruments (a) Derivatives The Group uses derivative financial instruments such as interest rate swaps to manage its financial risk as permitted under the Group s risk management policy. Such instruments are used exclusively for hedging purposes and not for trading or speculative purposes. APDC Trust has an interest rate swap agreement to fix the floating interest rate component for $12.5 million of its Debt Facility (50% of the drawn Core Debt amount) for five years. The interest rate swap agreement entitles APDC Trust to receive interest at quarterly intervals at a floating rate on a notional principal amount and obliges it to pay interest at a fixed rate. The interest rate swap agreement allows APDC Trust to raise long term borrowings at a floating rate and effectively swap them into a fixed rate. The interest rate swap is designated as a cash flow hedging instrument. Accordingly, the effective portion of changes in the fair value of the interest rate swap is recognised in other comprehensive income and accumulated in the cash flow hedge reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The fair value of the interest rate swap liability at 31 December 2015 was $599,000 (30 June 2015: $624,000). (b) Carrying amounts versus fair values At 31 December 2015, the carrying amounts of the Group s financial assets and liabilities approximate their fair values. (c) Fair value hierarchy The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: unobservable inputs for the asset or liability. 31 December 2015: The interest rate swap is measured at fair value based on the mark to market value quoted for forward interest rate swaps. These quotes are tested for reasonableness by discounting expected future cash flows using market interest rates for a similar instrument at the measurement date. The fixed rate on the interest rate swap is 3.94% per annum. Level 1 Level 2 Level 3 Total $'000 $'000 $'000 $'000 Derivatives Interest rate swap used for hedging - 599-599 Total financial liabilities carried at fair value - 599-599 30 June 2015: Derivatives Interest rate swap used for hedging - 624-624 Total financial liabilities carried at fair value - 624-624 17
Notes to the consolidated financial statements 12. Related party disclosures (a) Parent entity The immediate and ultimate parent entity of the Group is APDC Holdings Limited. (b) Controlled entities These financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy disclosures as described in Note 3: Ownership interest APDC Limited 100% APDC Trust - There have been no changes in related party arrangements since 30 June 2015. 13. Significant party disclosures Transactions with NEXTDC Limited Lease agreements APDC Trust has lease agreements with NEXTDC for M1, S1 and P1. The leases are on a triple net basis and for a 15 year initial term with options for up to another 25 years. The leases provide for upwards only annual CPI rental increases and market reviews every 5 years, not exceeding 110% of the preceding year s rent. The rental income for M1, S1 and P1 totalled $6,558,000 for the half year. In the event that the Group wishes to sell M1, S1 and P1, NEXTDC has the first right to acquire these properties. Alliance with NEXTDC The Group had an alliance with NEXTDC which expired on 21 December 2015. During the alliance period, NEXTDC granted to the Group, for no consideration, the first right to develop or own a data centre on market terms if NEXTDC wished to sell those rights. The Group granted to NEXTDC: first right of refusal to lease (lease rights) and/or, operate, develop, finance or manage (operation rights) on market terms any data centres that the Group acquired, developed or established; the right to consent to the acquisition by the Group of any data centre where the lease rights or operations rights cannot be offered to NEXTDC; the right to consent to the sale of assets to a NEXTDC competitor and the right to consent to the acquisition or development of any land or data centre. The rights under the alliance period applied to any data centre or land in Australia or Asia Pacific region. During the term of the alliance period, no suitable opportunities were identified and the rights were not exercised by either party. NEXTDC transactions and balances recognised in the consolidated financial statements Consolidated Statement of Profit or APDC APDC APDC APDC Loss and Other Comprehensive Income Group Group Trust Trust 1 July 2015 to 1 July 2014 to 1 July 2015 to 1 July 2014 to 31 Dec 2015 31 Dec 2014 31 Dec 2015 31 Dec 2014 $'000 $'000 $'000 $'000 Rental income 6,558 6,414 6,558 6,414 18
Notes to the consolidated financial statements 14. Subsequent events Since the end of the half year, the Directors of APDC Holdings and APDC Limited are not aware of any matter or circumstance not otherwise dealt with in the financial reports or the Directors Report that has significantly affected or may significantly affect the operations of the Group or APDC Trust, the results of those operations or the state of affairs of the Group or APDC Trust in financial years subsequent to the half year ended 31 December 2015. 19
lnterim Financial Reports Directors' Declaration The directors of Asia Pacific Data Centre Holdings Limited and Asia Pacific Data Centre Limited as responsible entity for Asia Pacific Data Centre Trust (collectively, 'the Directors') declare that: (a) the Financial Statements and notes as set out on pages 6 to 19 for Asia Pacific Data Centre Holdings Limited and its controlled entities (Group) and Asia Pacific Data Centre Trust (APDC Trust) are in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Group's and APDC Trust's financial positions at 31 December 2015 and of their performance for the half year ended on that date; and ii. complying with Australian Accounting Standard AASB 134 tnterim Financiat Reporting and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Group and APDC Trust will be able to pay their debts as and when they become due and payable. This declaration is made in accordance with resolutions of the Directors of Asia Pacific Data Centre Holdings Limited and Asia Pacific Data Centre Limited as responsible entity for Asia Pacific Data Centre Trust. Ju.L lan Fraser Chairman Brisbane 22February 2016 20
ABCD Independent auditor s review report to the stapled security holders of Asia Pacific Data Centre Holdings Limited and Asia Pacific Data Centre Trust We have reviewed the accompanying interim financial reports which comprise: the consolidated statement of financial position as at 31 December 2015, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year period ended on that date, notes 1 to 14 comprising a summary of significant accounting policies and other explanatory information and the directors declaration of the Group comprising Asia Pacific Data Centre Holdings Limited and the entities it controlled at the period end and from time to time during the half-year period; the statement of financial position as at 31 December 2015, the statement of profit or loss and other comprehensive income, statement of changes in equity and the statement of cash flows for the half-year period ended on that date, notes 1 to 14 comprising a summary of significant accounting policies and other explanatory information and the directors declaration of Asia Pacific Data Centre Limited as Responsible Entity for Asia Pacific Data Centre Trust (the Trust). Directors responsibility for the interim financial report The directors of Asia Pacific Data Centre Holdings Limited and the directors of Asia Pacific Data Centre Limited, as Responsible Entity for Asia Pacific Data Centre Trust (collectively referred to as the directors ) are responsible for the preparation of the interim financial reports that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the interim financial reports that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the interim financial reports based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial reports are not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group s and Trust s financial position as at 31 December 2015 and their performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Asia Pacific Data Centre Holdings Limited and Asia Pacific Data Centre Trust, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 21 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.
ABCD Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial reports of Asia Pacific Data Centre Holdings Limited and Asia Pacific Data Centre Trust are not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group s and the Trust s financial position as at 31 December 2015 and of their performance for the half-year ended on that date; and (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. KPMG Jillian Richards Partner Brisbane 22 February 2016 22